Bob Iger, the CEO of Disney, stated on Wednesday that the company had opted to expand into sports betting to target young consumers. What was the reason behind Penn Entertainment’s decision to invest in such opportunities?
Disney and Penn Entertainment signed a $2 billion deal on Tuesday to establish ESPN Bet, an online sports betting brand. The agreement stipulates that Penn will have the rights to the brand for 10 years and the option to extend for another 10 year period if both parties agree.
ESPN will receive $1.5 billion in cash and $500 million in warrants over a 10-year period.
During the Disney earnings call on Wednesday, Iger expressed his belief that the partnership can result in growth for both ESPN and Penn businesses.
Iger stated that they have been in talks with multiple entities for a while and have expressed their desire to increase engagement with ESPN’s younger audience.
He added, “We were incredibly grateful to Penn because they came forward with an offer that far exceeded all the competition and will be a great growth engine for our business.”
ESPN Bet is set to launch in the fall in 16 states where Penn holds sports betting licenses, replacing Barstool Sportsbook, which was previously sold to Dave Portnoy for just $1.
ESPN chairman Jimmy Pitaro indicated in November 2022 that the sports network was interested in expanding its involvement in sports betting and had conversations with regular individuals. He also stated that ESPN did not want to establish odds or take money, but instead wanted to partner with someone.
The assumed partner was DraftKings, which Disney had a stake in, but they sold their roughly 5 percent interest in Draftkings last quarter for $90 million.
Disney CEO Bob Iger has announced that ESPN is in talks with potential strategic partners to aid the cable network in transitioning to a direct-to-consumer model. Pitaro confirmed that they are seeking partners who can enhance the value of the flagship product.
On the earnings call, Iger stated that our sports business and DTC ambitions are closely intertwined. Whether or not they will bring their ESPN flagship channels directly to consumers is not a matter of when it will happen, and the team is working diligently to determine the appropriate pricing and timing for this move.
The interest from the interest has led Iger to declare that the company is looking forward to expanding its partnerships and is highly encouraged. He also mentioned potential content partners, as well as distribution and marketing support and a combination of both.